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Demand effects of the falling wage share in Austria

Listed author(s):
  • Engelbert Stockhammer

    ()

    (Department of Economics, Vienna University of Economics & B.A.)

  • Stefan Ederer

    ()

    (Department of Economics, Vienna University of Economics & B.A.)

This paper aims at empirically estimating the demand effects of changes in functional income distribution for Austria. Based on a Post-Kaleckian macro model, this paper estimates the effects of a change in the wage share on the main demand aggregates. The results for the behavioral functions for consumption, investment, prices, exports and imports are compared with the specifications of the WIFO macro model and the IHS macro model. A reduction in the wage share has a restrictive effect on domestic demand as consumption decreases more strongly than investment increases. Because of the strong effects on net exports the overall effects of a decrease in the wage share are expansionary. However the latter effect operates only as far as the fall in the wage share increases competitiveness. As wage shares were also falling in Austria’s main trading partners, the effect seems to have been neutralized.

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File URL: http://www.wu-wien.ac.at/inst/vw1/papers/wu-wp106.pdf
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Paper provided by Vienna University of Economics and Business, Department of Economics in its series Department of Economics Working Papers with number wuwp106.

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Date of creation: Aug 2007
Handle: RePEc:wiw:wiwwuw:wuwp106
Note: PDF Document
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Web page: http://www.wu.ac.at/economics/en

References listed on IDEAS
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  1. Josef Baumgartner & Fritz Breuss & Serguei Kaniovski, 2004. "WIFO-Macromod. An Econometric Model of the Austrian Economy," WIFO Working Papers 241, WIFO.
  2. Stefan Eger & Engelbert Stockhammer, 2007. "Wages and Aggregate Demand: An Empirical Investigation for France," Chapters, in: Money, Distribution and Economic Policy, chapter 6 Edward Elgar Publishing.
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